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GNWT hoping to save for slow times
Northern News Services
Published Monday, May 30, 2011
Finance Minister Michael Miltenberger is counting on the Northwest Territories Heritage Fund Act, or Bill 10, to pass third reading in August, several weeks before the next territorial election.
Heritage funds, as they are often called, are nothing new. Alberta created one in 1976 with an initial investment of $1.5 billion. The fund then received 30 per cent of all the province's non-renewable resource royalties. It's worth $15 billion today.
The territorial government aims to ink a devolution and resource royalty agreement with Ottawa in the not too distant future, but the GNWT doesn't expect the flow of cash from oil, gas and mining to last forever. That's why the government has to get started now, said Miltenberger.
"We have the bill here, we have time to sort out specific issues. We should look at getting started. We're creating a box and the tools to start saving money," he said.
He said the GNWT is preparing to develop a small endowment fund that will grow at a modest level and produce a stream of additional revenue for government operations in years to come.
The bill currently calls for money to be invested for a minimum of 10 years before it can be used.
MLAs seem mainly positive in their assessment of the bill, but some expressed reservations about how the money would be spent and concerns that the fund would be managed by the GNWT's financial management board, made up of cabinet ministers.
Mackenzie Delta MLA David Krutko said the NWT is getting "ripped off big time" when it comes to revenue from its resources, devolution or not, and needs something in place to get the fund going.
"The federal government owns 30 per cent of (the Norman Wells oil) field, bringing in something in excess of $100 million a year in revenues from the resource that is owned supposedly by Northerners but no royalties are being paid by the federal government, no compensation to the people of the Northwest Territories," said Krutko.
He said if the federal government distributed 10 or 20 per cent of its 30 per cent share of the NWT oilfield, it could be a way to kick-start the fund.
"I think the whole intention of the heritage fund is to ensure that once those resources are gone, whether it's diamonds, oil and gas or whatever, that you have a means of sustaining your economy with a heritage fund."
At a public hearing with the standing committee of government operations on May 20, Sahtu MLA Norman Yakeleya asked how income would be generated from these funds.
"I'm looking at the big 'if' on the devolution deal. Sixty-million-dollars (from resource royalties to the GNWT), a certain percentage goes to the aboriginal groups so the $60 million drops to about $48 million. I think for the gatekeepers of this fund, that we have some more discussion as to the types of long-term investments where we direct the funds," he said. "Government needs to make money, protect their money, budget their money and leverage this money, to keep the best financial intelligence on this money."
Richard Truscott, the Alberta and NWT director for the Canadian Federation of Independent Business, told the standing committee of government operations last week about the history of Alberta's heritage fund, and gave advice about how the NWT could best make use of its fund.
"Alberta has a long history of its own Heritage Savings Fund and there are definitely a few lessons to learn and pitfalls to avoid from Alberta's experience," Truscott said May 20.
Incremental changes in the policy, like transferring investment income to general revenues and lowering annual contributions to 15 from 30 percent, has stalled the fund's growth to $15 billion - about the same as it was 20 years ago, according to Truscott.
He also said the maturation term for the fund should be longer than 10 years to help build up a larger investment, to which many MLAs attending the committee meeting agreed.
Miltenberger said there still needs to be discussions on many aspects of how the fund will work.
"The next legislature will have to decide how much, if any, they want to start putting in there to get it to start growing. We're setting up the instrument to allow us to do this. Right now we don't have the capacity to do this, and this will give us that capacity.
"We are mainly a non-renewable, resource-based economy. It's not going to last forever, so we've got to take steps today to plan for the future and that's a forced savings account, a pension plan for our children and their children."